Russian regions buckle under financial pressure, Ukraine's foreign intelligence says
A budget crisis in Russia's regions has moved into a practical phase at the start of 2026, emerging in widespread delays to wage payments in the public sector.
Source: Foreign Intelligence Service of Ukraine (FISU)
Details: The Republic of Khakassia has been one of the clearest examples, where education workers, medical staff and emergency services personnel have been left without pay.
Quote: "In late December 2025, the accounts of 30 schools and nurseries were frozen due to debts. The head of the republic publicly acknowledged that the pay problem remains unresolved.
Financial collapse has systemic roots. Falling prices for coal, oil and metals have sharply reduced regional revenues."
More details: Export-oriented sectors including metallurgy, coal mining, oil refining and chemicals have lost profitability because of weaker external demand.
Further pressure has come from lower receipts from small and medium-sized businesses, rising costs linked to wage indexation and social payments and the effective closure of the debt market amid high interest rates.
The FISU said that the crisis in Khakassia is being intensified by the region's reliance on the coal industry which previously accounted for a large share of its tax base. Over two years, the regional budget has missed out on more than US$1.146 billion.
The authorities have moved to manual management; funds are being redistributed, partial payments made, delays imposed for certain categories and payments split into instalments as tools to contain social discontent rather than solve the problem.
The republic's budget deficit for 2025 is estimated at about US$61.2 million and is forecast to rise to US$90.4 million in 2026.
Khakassia is only part of a wider picture, the FISU says, adding that similar imbalances are already taking shape in at least 15 regions of the Russian Federation.
In Kemerovo Oblast, another coal-producing region, about 75% of companies in the sector are operating at a loss, while coal revenues in 2026 could fall by almost a further US$509 million.
The FIUS reports that the budget crisis in Khakassia shows a structural depletion of regional finances in Russia, particularly in commodities-dependent regions.
Quote: "Even if the Kremlin tries to put out the problem temporarily through targeted subsidies and personnel decisions, that will not change the reality: the tax base is shrinking and the scope for manual budget management is practically exhausted."
Background:
- The FISU reported earlier that sanctions, the loss of foreign markets and worsening global conditions have exposed the structural weakness of Russia's regional budgets, which are no longer able to meet basic obligations. The situation is most severe in traditionally depressed regions, including the Republic of Kalmykia and Pskov Oblast.
- Water tariffs have been doubled in Russia-occupied Ukrainian cities despite ongoing disruptions to water and heating supply. Two-tier increases in utility payments have also been reported within Russia itself.
- The Kremlin plans to raise taxes and cut social benefits, while senators and governors will bear the brunt of the criticism.
- The FISU reported at the end of 2025 that Russia's economy is showing signs of systemic strain, and this is reflected in a steep rise in complaints from its citizens about labour rights violations.
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